If Amazon wants to improve its grocery reach in the U.S., it might want to look at what's already there, according to a new analysis.
Analysts at Wall Street firm Bernstein have put together a comeback strategy for the delivery giant — a strategy that includes purchasing divested stores via the proposed Kroger, Albertsons merger, according to reporting from Business Insider.
Kroger and Albertsons are expected to divest up to 500 stores, many in areas that could be favorable for Amazon. The acquisition price could be another selling point. In addition to the strategy connected to the merger, Bernstein analysts are also proposing that Amazon quickly rebrand stores or focus on stores in targeted regions.
Kroger and Albertsons had no comment.
In a letter to shareholders in early April, Amazon CEO Andy Jassy said the grocery business, which has struggled to get off the ground, needs to be a focal point of the company’s strategy. Back in 2017 Amazon paid $13.7 billion for the Whole Foods chain, but that has come with bumps and bruises. Amazon also has been forced to close Amazon Go and Amazon Fresh locations, and has laid off thousands of workers. Amazon announced in February it was pausing the rollout of its Amazon Fresh stores while it re-evaluated the concept’s economics.
Jassy stressed the need to find a mass grocery format that is worth expanding broadly. He said a larger physical store footprint is needed because most of grocery shopping is still being conducted at brick-and-mortar locations.
In response to the possible pivot, Poonam Goyal, a senior e-commerce and athleisure for Bloomberg Intelligence told Yahoo! Finance that Amazon owns a tiny piece of the grocery sector and could be looking to grow its footprint through acquisitions, organically, or via a partner. Goyal also said, in his opinion, Amazon just does not have the expertise to build the grocery business with scale.